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sterling balances are of the order of £520 million (private holdings
7225
125 So Million, official holdings ovû 5200 million).
A substantial
proportion of these balances represents the sterling backing in the
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currency Fund (19 million).
15. hong kong is a member of the sterling area and keeps its
resurves in sterling; but in practice the Colony has been granted
wide dispensations from the ordinary rules of membership. Special arrangements have been made to enable the entrepot trade to continue
which involve permission for a free market in U.S. dollars.
16. Hong Kong's adverse balance of visible trade with the world has
been Tinanced mainly by income from invisibles including tourism,
shipping, banking and commercial services and through the flow of capital funds from abroad (mainly from overseas Chinese e.g. in the U.S.A.). No precise balance of payments figures are available for
the Colony but it seems unlikely that, over the years, it hus run any
pronounced overall balance of payments deficit or has therefore
boon a drain on the sterling area foreign exchange reserves.
17. Apart from the cost of maintaining military forces in the Colony,
Hong Kong is self-supporting. It is not in receipt of any
financial assistance from H.M.G. other than an interest free loan of
$3 million made available in 1957 towards the extension of Hai Tak
Allport.
18. Political
Hong kong is of political benefit to us as a Free world enclave
on the mainland of China. The continued influx of refugees from
China demonstrates that a free capitalist society, even, of necessity, without representative government is preferable in the eyes of many
Chinese, to the Communist society of China. The loss of Hong Kong
to uhim would be a severe blow to Free World prestige in Asia and would correspondingly boost China's prestige particularly among the
overseas ühinese in South East Asia.
19. Car presence there is a British contribution to inter-dependence. The Americans recognise its usefulness.
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